Euro gains after biggest weekly drop in six weeks; Swiss franc firm
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[August 19, 2019] By
LONDON (Reuters) - The euro advanced on
Monday after registering its biggest weekly drop in nearly two months as
risk appetite gradually returned to global markets after a week of
turmoil, though investors were still wary about the near term outlook
for the single currency.
With hopes of fiscal stimulus from Germany growing and steps by China
over the weekend to cut corporate lending costs pushing up equities,
growth-sensitive currencies such as the Australian dollar also edged
But despite the gains, the perceived safe-haven currencies such as the
Japanese yen <JPY=EBS> and the Swiss franc <CHF=EBS> remained firmly in
demand with sight deposits at the Swiss National Bank registering
another big weekly rise, indicating more intervention from policymakers.
"Markets seem to be recovering after last week's selloff though some of
the safe haven currencies still seem to be in demand," said Adrian
Schmidt, chief FX strategist at Continuum Economics based in London.
"But authorities can only slow the appreciation trend in some of those
currencies such as the Swiss franc rather than drawing a line in the
sand," he said.
JP Morgan expects the franc to appreciate to 1.07 francs per euro by the
end of the year compared to 1.08755 francs now.
Against the greenback <EUR=EBS>, the euro rose 0.2% to $1.1114 in London
trading after falling 1% last week, its biggest weekly drop since early
Graphic: SNB sight deposits and EURCHF -
Investor optimism is also likely to be capped before a speech by U.S.
Federal Reserve Chairman Jerome Powell later this week at the Jackson
Hole central bank conference.
Market strategists believe his comments will be aimed at reassuring
nervous markets that the Fed will remain in an easing stance and set the
stage for more rate cuts after a quarter percentage point rate cut in
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A view shows a 10 Euro cent coin is seen inside a bulb with
crude oil at a laboratory in the Yarakta Oil Field, owned by
Irkutsk Oil Company (INK), in Irkutsk Region, Russia in this
picture illustration taken March 12, 2019. REUTERS/Vasily
"Powell's speech will set the stage for, at the minimum, a 25 basis points rate
cut at the September meeting, stressing that quantitative tightening is over and
stressing that the committee's bias is now back in accommodation mode," said
Elsa Lignos, global head of FX strategy at RBC Capital Markets.
Money markets are pricing in a cumulative 67 basis points of rate cuts from the
Fed by the end of the year.
The dollar index <.DXY>, which measures the greenback against six major
currencies, was broadly steady at 98.20, close to a two-week high of 98.339
reached on Friday.
Global markets went into a tailspin last week after bond yield curves inverted,
signalling the global economy was headed towards a recession, sending panicky
investors to the relative safety of perceived safe-haven assets such as gold and
Latest weekly positioning data showed hedge funds ramped up their holdings of
the Japanese currency for a second consecutive week versus the greenback.
Against the yen <JPY=EBS>, the dollar was little changed at 106.57 yen, near a
one-week high of 106.98 yen.
(Reporting by Saikat Chatterjee; Editing by Toby Chopra/William Maclean)
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